Dr. Mustafa Mastoor’s Speech to the Parliament, 3rd December 2017

بسم الله الرحمن الرحیم

Dr. Mustafa Mastoor’s Speech to the Parliament, 3rd December 2017

Nominated for the Ministry of the Economy

Toward a Productive Afghanistan

 

 

H.E the Speaker of the house, Deputies, Secretaries and Members of the house,

Aslamailkum Wa Rahmatullah Wa Barakat

 

 I would like to thank the Government of National Unity (GNU) for nominating me for the Ministry of Economy and introducing me for the vote of confidence to this honourable house. 

 

Honourable delegates of the Afghan people!

Today, my speech is focused around four aspects:

1-                 Background information about myself

2-                 An overview of the current economic situation in the country

3-                 The way forward; proposed plans for the Ministry of Economy

4-                 Conclusion

 

 

1-    Background information about myself

I was born in Kabul city 48 years ago. I finished my primary and secondary education both in Kabul and Herat provinces. After successfully graduating from Kabul Medical University, I obtained a master’s degree in Business Administration from Preston University of Peshawer, Pakistan.  During the Taliban period, I worked as the head of programs for disabled Afghans for Swedish Committee, an international NGO in 9 different provinces. In the past fifteen years, I have worked in several capacities within the Afghan government. First, at the Ministry of Health then at the Ministry of Finance I have worked as the General Director of Budget, and nearly for 10 years as the Financial Deputy of the Ministry of Finance. I have also served as the Special Representative to the Office of the Chief Executive (OCE) for Afghanistan for the last three years.   

During this period, I have either led or been a member in drafting, developing and implementing policies, strategies, regulations and reform programs. I am proud to say that I have worked on bringing structural and administrative reforms to the Ministry of Health and the Ministry of Finance, preparing the national budget and tens of other regulations.  On a regional and international level, I have been a founding member of several organisations, led Afghan delegation in regional and financial negotiations and helped shape big projects such as CASA-1000, TAPI among others. I can claim that I have been able to successfully work and train many high-ranking officials who currently work as policymakers for the government or international organizations.

Dear delegates of the Afghan the people!

I see it appropriate to thank and recognize the work of my predecessors in the Ministry of Economy, who have worked to lay down the building blocks. However, considering our economic challenges, we have a long road to prosperity. It requires harder work and more efforts to redirect the Ministry of Economy toward its main purpose. As specified in the ministry’s mandate and published in the official government gazette, the Ministry’s primary duties and responsibilities are as follows:  

a)     Study and assess existing development capacities in provinces for economic analysis, growth and development of provinces, neighbourhoods and sectors of the national economy.

b)     Management and coherence, policy design, strategy and short-term, medium and long-term socio-economic development plans to accelerate the country's economic and social development.

c)     Receiving project proposals, evaluating, analysing and prioritizing development projects nationwide.

d)     Monitoring and evaluation of the implementation of the policy, plans, and development projects for all budget units.

 

2-    An overview of the current economic situation in the country

Members of this honourable house!

Macroeconomics is concerned with household incomes, balance growth, labour, production, consumption, investments and trade. The best way to get a sense how macroeconomics components are performing we must look at their respective indicators. The most recent indicators for economic performance in Afghanistan do not give a pretty picture and we must not shy from speaking about them. The only way to prosperity and a productive Afghanistan is to carefully plan, bring about a coordination within the economic agencies in order to implement those plans effectively.

I would like to draw your attention to the following seven issues that best describe our current economic situation:

1)                 Poverty

It is estimated that the population of Afghanistan is 29.7 million people, of which approximately 39 percent of them live below the poverty line. In real numbers this means a little less than 11 million Afghans are poor, of which around 8 million live in the rural areas and over 2 million live in the cities. Around half of the population of nomads in Afghanistan also live below the poverty line. Approximately 30 percent of the population i.e. 9 million Afghans are facing shortages in getting required calories every year, approximately 20 percent i.e. 5.5 million of the 9 million face lack of required levels of protein (meat, dairy, eggs and vegetables) advised by the health authorities.

2)                 Population growth

The population in Afghanistan grows at 2.03 percent every year, in real numbers 600 thousand more people per year. With an economic growth rate of 2.6 percent per year, it is not a sustainable rate to improve poverty. Given the population growth compared to the current economic growth rates we are getting poorer every year. Higher population growth rates require higher sustainable economic growth rates.

3)                 Unemployment

Currently the unemployment rate in Afghanistan is 22.6 percent which means around 1.9 million Afghans who are eligible and actively looked-for work, are jobless. This doesn’t include 1.2 million Afghans who were underemployed last year. Estimates show that 400 thousand boys and girls are added to our labour force per year, which adds additional pressure to the demand for labour. High unemployment levels pose a deeper social and political concern in a country which is currently dealing with high insurgency.

4)                 Trade deficit

In the financial year 1395, Afghanistan had 600 million USD worth of exports compared to a staggering 6.5 billion imports, almost ten times higher than our export value. The net trade deficit is huge and makes Afghanistan a purely import-based economy. Steps must be taken toward a productive Afghanistan. If we look beyond natural gas, vehicles, electric machinery, our top import items include wheat, metals, construction material and electricity. With the right interventions, this could be turned around to produce these items domestically. This will lower our current trade deficit, as well as employment opportunities and poverty rates. With the current trade deficit, we have a high dependence on imported products hence other countries. Afghanistan has absolute advantage and sometimes comparative advantage in most of these items that we currently import. This is simply not sustainable and must be changed.

5)                 Fluctuating economic growth

Annual GDP growth rates in Afghanistan has been fluctuating between 1 to 23 percent in the last fifteen years. High dependence on agriculture sector and donor assistance have been the major contributing components of the fluctuations. In the last fifteen years, the share of agriculture and manufacturing sectors in our GDP composition has been 50 percent with the other half coming from services sector. Service sector is concentrated around the city centres and urban areas and most people who live in rural Afghanistan has not benefited from the high growth rates. Additionally, this has contributed to the rising inequality between the urban dwellers and rural masses.

6)                 Unbalanced growth

From a planning and strategy point of view, another major issue so far has been unbalanced growth. In the last fifteen years, despite high levels of donor assistance and governments promises, our provinces have witnessed unbalanced growth due to poor planning. Economic activities have concentrated in the city centres and there is less positive spill over effects to rural areas where most of the masses live. Moreover, Non-governmental organisation (NGOs) have also targeted provincial centres and cities whereas it is the rural areas that need the economic assistance and elevation.

7)                 Less visible private sector

According to the World Bank annual report on Doing Business Indicators (DBI) Afghanistan is ranked 183rd out of 190 countries. This indicate that the private sector is facing major challenges in fulfilling their primary role, which is being the backbone of the economic growth. On several aspects, their share in contributing to growth is limited to government contracts, less steps have been taken toward building the infrastructure required for the private sector. This is the very reason that limits Afghan firms from competing for national and international projects. Sometimes our firms do not even qualify to compete for these projects. This is must be changed. Afghanistan’s economy must shift to a producing-based economy. The current situation is not in the benefit of the public sector nor that of the private sector.

3-    The way forward; proposed plans for the Ministry of Economy

 

Excellency the house speaker and members!

If I am voted as the future Minister of Economy, in order to steer toward a productive Afghanistan with the aim of achieving higher economic growth, creating employment opportunities, lowering poverty rates and finally toward higher stability and economic prosperity, I will do the following:

a)                 Substituting imports with domestic production in order to obtain more self-reliance

b)                 Improving quality and standardising Afghan exports with the aim to enable competitiveness

c)                 Creating an expert and effective Ministry of Economy

 

 

a)     Substituting imports with domestic production in order to obtain more self-reliance

The Afghan constitution prescribes a market economy system for Afghanistan that is driven by the private sector. Considering higher population growth rates, inefficient public sector in providing services and contributing to economic development, the way forward is to strengthen the role of the private sector. We must encourage domestically producing firms and place greater faith in them.

I propose to substitute the import of items where Afghanistan possess absolute or comparative advantage. With the aim of work toward creating more comparative advantages in the future. In light of Afghanistan National Peace and Development Framework (ANPDF), in coordination with the Economic Committees of both houses of the Parliament and in close cooperation with the private sector, our strategy will cover a short-term and medium-term vision. The primary objective behind recapturing domestic markets strategy and creating better value chains for domestic firms is to achieve higher and sustainable economic growth.

The net import value of five consumption items (wheat, edible oil, diary-products, vegetables, beans and consumption meat) reaches 1.5 billion USD, which constitutes 1/4th of the value of our total imports. Furthermore, we import around 600 million USD worth of cement and electricity per year. The Ministry of Economy has the legal mandate and in conjunction with other relevant ministries, in the next six months will put forward specific strategies to create the space for domestic production of these items. The policy will focus on reducing the cost of per unit of domestic production.

b)    Improving quality and standardising Afghan exports with the aim to enable competitiveness

Last year Afghanistan’s net export value was estimated to be 600 million USD, in other words 8 percent of the total share of our trade. The 8 percent share is not proportionated to potential investment opportunities. Discussions on promoting exports require a twofold approach, we must take steps to help the private sector to find the ability to export more, as well as we must ensure that the quality of our exports meet that of the regional/international competitors. Some major steps and decisions has been made in the last three years in promoting exports and helping private sector. We have witnessed a growth in the value of our exports. We will work to create a comprehensive export program that will incorporate both of those aspects; boasts quantity and quality of our exports. This way we will work with Afghan expatriates to attract investment and FDI toward the main export items. This is one of the quickest ways to create employment opportunities, lower poverty and achieving sustainable growth rates. 

Dear members of the house of parliament!

Exports have the potential to contribute toward our economic growth, increase our income and provide more jobs when they have a competitive edge. Creating this requires separate management and quality assurance timeframe. I stress on creating the competitive edge for Afghan products regionally through careful planning.

I would like to draw your attention to an example of our export item; Gelguzh. The volume of our Gelguzh exports to Pakistan is 40,000 tons per year. The net value obtained from this endeavour is 600 million USD. However, after a few simple processing steps Pakistan exports the same level of Gelguzh to China for a net worth of 1.1 billion USD. They make 500 million USD more profit. After standardising to meet the international requirements, the Chinese export the same amount of Gelguzh to Europe and the US for a net worth 2 billion USD. This illustrates the need for investments in infrastructure and standardising export quality to earn the extra 1.5 billion USD worth of our Gelguzh, which constitutes one item of our export basket. I believe a similar story is true for all of our export items, from our saffron, almond to the rest of the export basket such as fresh fruits, medicinal herbs and so on.

A comprehensive export strategy will have a logical link to production, access to cheaper credit and introduction of insurance systems among other institutional reforms. As part of my proposals, the central bank and other institutions have started working on creating the policy. To bring these changes and the rest of my plans proposed so far, we need an expert and effective Ministry of Economy, which is the third issue in my agenda.

c)     Creating an expert and effective Ministry of Economy

If I am voted as the Minister of Economy, I will restructure and reform the ministry to find its place in the Afghan government and to fulfil its legal mandate. The reforms will focus on three aspects, 1) structural, 2) building the human capacity of the ministry, qualitatively and quantitatively and 3) research guided policy proposals and monitoring mechanisms. 

First, structural reforms of the ministry are carried out with the aim of creating a structure that matches the legal mandate specified for the ministry. The current structure is good for day-to-day issues, monitoring small-scale development/procurement projects, registering NGOS and recruiting advisors for other ministries. With the legal mandate of the ministry in mind, it needs a structure that has the ability to steer macroeconomic decisions and policymaking.

Second, the ministry has a pool of young and able human resource who is committed to hardwork, however it has the potential to be boasted quantitatively and qualitatively. It lacks the expert workforce to steer macroeconomic policies or countrywide projects. The ministry doesn’t have an employee with a doctorate level qualification. Out of the 41 employees with a master’s degrees, only 10 of them have an economic related master’s degree. The process of hiring more experts with relevant qualification and work experience to boast the human capital of the ministry has already began and will be intensified further.

 Third, the priority during my time at the Ministry of Economy will be research guided policy making and goal-oriented approach. All future policies and strategies at the ministry from monitoring mechanisms to proposing country-wide projects, will be informed from this approach. There is an urgent need for creating a research unit within the ministry to undertake the required research.

The Ministry of Economy that has the secretariat for the Economic Committee of the Council of Ministers too, in this capacity we will work to pull ouselves out of the day-to-day related issues and refocus on providing economic analysis for development projects. The ministry also has the responsibility for steering NGO activities. NGO activities monetary worth reached 860 million USD last year, this needs an urgent attention as large portions of these NGOs are operating in the centre of the provinces or mainly in Kabul. Out of the 2100 NGOs active in Afghanistan, 1500 of them operate in Kabul compared to 2 NGOs that operate in Paktika. There need for reorganisation of NGO activities on two levels; sectorial service provision and dividing up their activities geographically to avoid parallel activities and bring efficiency.

I will reorganise efforts at the ministry in: providing economic analysis of the policies, national projects and the national budget backed by research, collect information and use it inform our monitoring systems and coordinate our strategies under the ANPDF. I have more than 12 years of experience at the Ministry of Finance and have built a vast network of connections with the national and international partners. In the past three months as the acting minister of economy, many international partners have promised to help us both financially and providing the expertise to achieve the goals I have set out for the ministry.

4-    Conclusion

Honourable delegates of the Afghan people!

I have developed the strategy for the ministry in light of the priorities set by the government, in conjunction with the recommendations from the Economic Committees of the houses of the Parliament, Unions and discussions with the economists. The document paper will be finalised shortly and shared with the members of this house as well as the public. In light of these policies, we hope to lower poverty levels, create more jobs, boast exports, achieve sustained growth rates, and fasten the road toward a future productive Afghanistan.

Dear honourable members of the house!

I do not claim to achieve the changes mentioned overnight or bring about the reforms single handed. It is something that cannot be achieved alone. However, with the grace of God almighty, the strong commitment shown by the Government of National Unity (GNU), the resilience from the private sector and your help, I see the strategy “a productive Afghanistan” not only feasible and implementable but consider it a quick way forward to ease the challenges we mentioned earlier. 

I strongly believe that objective investments will result in adding millions of additional revenues and this is easily possible with the help of relevant agencies. This will give quick results and solve the high unemployment rates and reduce poverty that our people are struggling with every day. During my time at this ministry I will promoting regional economic integration, support economic projects that contribute to our and that of our neighbouring country’s stability, security and prosperity.

To end with, once again I would like to reiterate that I will uphold our national interests at highest value and place them above all else. With the trust in God almighty, within our religious and national values and responsibilities, I promise to implement the policies I set out and implement them to my best ability. I hope you trust me with this job and vote for me.

God bless Afghanistan